Financial Highlights Audited

Overview

 

Lonza’s 120th anniversary year in 2017 was characterized by record-breaking full-year results, which included double-digit organic sales growth, organic CORE EBITDA and CORE EBIT growth well above sales growth and an attractive CORE RONOA of 28.3% for Lonza standalone.

We exceeded our full-year 2017 guidance and demonstrated our strong organic growth potential. Having closed the acquisition of Capsugel on 5 July 2017, Lonza consolidated Capsugel for nearly six months in 2017. Lonza reported sales of CHF 5.1 billion (Lonza standalone CHF 4.6 billion) for the full-year 2017, a 23.5% increase in reported currency compared with the same period in 2016 (Lonza standalone 10.4% sales growth in reported currency).

Margins for Lonza further improved, resulting in a record-breaking CORE EBITDA margin of 24.8% (23.9% Lonza standalone) and CORE EBIT margin of 18.8% (18.0% Lonza standalone) in reported currency.

Net debt as a consequence of the Capsugel acquisition ended 2017 at CHF 3.8 billion, which resulted in a net debt/CORE EBITDA (proforma) ratio of 2.65× – a leverage level significantly below the previously communicated threshold of up to 3× net debt/CORE EBITDA. The ratio was also supported by the strong operational free cash flow of CHF 619 million before acquisitions.

Our outstanding organic sales growth and high margin improvement demonstrate Lonza’s robust operational performance and commercial excellence. Pharma&Biotech and Specialty Ingredients contributed to the record-breaking full-year results with offerings along and beyond the healthcare continuum as growth drivers. With less than six months on our books until the end of the reporting year, Capsugel has already shown potential to add to Lonza’s growth, especially as synergies are expected to materialize starting in 2018.

Key Figures Lonza Standalone

million CHF 2017 Change in % 2016
       
Sales 4,562 10.4 4,132
CORE EBITDA1 1,091 18.8 918
CORE EBITDA Margin 23.9%   22.2%
EBITDA 1,060 25.0 848
EBITDA Margin 23.2%   20.5%
CORE EBIT1 822 26.3 651
CORE EBIT Margin 18.0%   15.8%
EBIT 728 49.8 486
EBIT Margin 16.0%   11.8%
CORE RONOA1 28.3% 31.6 21.5%
RONOA 19.3% 52.0 12.7%

Key Figures Lonza Including Capsugel

million CHF 2017 Change in % 2016
       
Sales 5,105 23.5 4,132
CORE EBITDA1 1,265 37.8 918
CORE EBITDA Margin 24.8%   22.2%
EBITDA 1,153 36.0 848
EBITDA Margin 22.6%   20.5%
CORE EBIT1 958 47.2 651
CORE EBIT Margin 18.8%   15.8%
EBIT 723 48.8 486
EBIT Margin 14.2%   11.8%
CORE RONOA1 29.1% 35.3 21.5%
RONOA 9.7% (23.6) 12.7%
Operating Free Cash Flow (before acquisition) 619 (3.0) 638
Operating Free Cash Flow (2,691) (759.6) 408
Net Debt 3,762 137.5 1,584

Financial Summary 2017

Financial Summary – Lonza Standalone

 

  • Sales growth of 10.4% in reported currency, rising to CHF 4,562 million
  • CORE EBITDA growth of 18.8% in reported currency, reaching CHF 1,091 million
  • CORE EBIT experienced growth of 26.3% in reported currency, increasing to CHF 822 million
  • Margin improvement resulting in an organic CORE EBITDA margin of 23.9% (+1.7 pp compared with same period last year) and organic CORE EBIT margin of 18.0% (+2.2 pp compared with same period last year) in reported currency
  • CORE RONOA improved significantly to 28.3% (21.5 % in 2016)

Financial Summary – Lonza Including Capsugel

 

  • Sales growth of 23.5% in reported currency, rising to CHF 5,105 million
  • CORE EBITDA growth of 37.8% in reported currency, reaching CHF 1,265 million
  • CORE EBIT experienced growth of 47.2% in reported currency, increasing to CHF 958 million
  • Margins improvement for Lonza including Capsugel resulting in a CORE EBITDA margin of 24.8% (+2.6 pp compared with same period last year) and CORE EBIT margin of 18.8 % (+3.0 pp compared with same period last year) in reported currency
  • CORE RONOA improved to 29.1% (21.5% in 2016)

Historical Progression

Sales Progression (in million CHF)

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CORE EBITDA (in million CHF) and CORE EBITDA Margin

 

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CORE EBIT (in million CHF) and CORE EBIT Margin

CORE_EBIT_and_margin-in-%.png

CORE RONOA


CORE-RONOA_in-%.png

Capital Expenditures (in million CHF)  

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Net Debt (in million CHF)


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Net Debt/CORE EBITDA


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Capital Measures in 2017

 

During 2017 the Capsugel acquisition was financed through a combination of equity and debt instruments. Following the success­ful placement of 5.0 million new shares with gross proceeds in the amount of CHF 865 million by way of an accelerated bookbuilding in February, Lonza offered – after the approval of shareholders dur­ing the Annual General Meeting (AGM) on 25 April 2017 – a total of 16,548,612 newly issued shares by way of a discounted rights offering with gross proceeds in the amount of CHF 2.3 billion.

The balance of the acquisition price was financed through indebt­edness including a USD 1.0 billion term loan and USD 1.4 billion bridge loan facilities provided by the assigned banks. The bridge was refinanced by traditional debt instruments. Lonza issued dual tranche CHF 235 million straight bonds in July 2017. The bonds have a maturity of 4 and 7 years with coupons of 0.2% and 0.7%, respectively.

Furthermore, we priced our multi-tranche “Schuldschein” loan (private placement) with a total size of EUR 700 million and USD 200 million at competitive market terms in August 2017. The EUR tranches have maturities of 4 and 6 years with fixed and variable coupons, respectively, while the USD tranches have maturities of 5 years (variable coupon) and 7 years (fixed coupon). In December 2017 Lonza placed a USD 100 million, 7-year tranche “Schuldschein” loan. The proceeds plus available cash were used to fully redeem the outstanding debt bridge.

Outlook 2018

 

After a boost in performance and a large number of growth activi­ties started in 2017, the focus for 2018 will be on thorough execu­tion and integration, making sure that all synergies can be captured. A number of new business teams are at the starting line and ready to capture those synergies. Lonza will also continue to invest in innovation while further improving our operational excellence across the entire  now larger  Lonza portfolio.

By integrating, modernizing and optimizing Lonza’s enabling func­tions – like IT, procurement and finance – we are ensuring that the company structure is fit for further growth. Based on the sound foundation laid in 2017 for the future, and starting from a new baseline, Lonza (including Capsugel) is an­nouncing the following outlook for 2018:

  • Mid-single-digit sales growth on a comparable basis in line with Mid-Term Guidance 2022
  • 100 bps improvement in CORE EBITDA margin in line with Mid-Term Guidance 2022

The Outlook 2018 is a next step toward achieving our Mid-Term Guidance 2022. During 2018 the healthcare continuum is expected to grow above average while Lonza is executing ongoing optimizations in parts of the basic portfolio like the discontinuation of fertilizers.

Mid-Term Guidance 2022

 

With 120 years of company history, Lonza is stronger than ever and well prepared to maintain positive momentum toward the company’s 125th anniversary in 2022 and beyond. Therefore, Lonza confirms the Mid-Term Guidance 2022, as announced during the half-year results presentation in July 2017:

  • Sales CHF 7.5 billion
  • CORE EBITDA margin 30%
  • CORE RONOA 35%

During 2018 CORE RONOA (return on net operating assets) will be replaced by ROIC (return on invested capital).

The Outlook 2018 and Mid-Term Guidance 2022 are based on the present business composition, macro-economic environment, cur­rent visibility and constant exchange rates.